A Shot in the Arm for Drugstores

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

Ironically, the drugstore and pharmacy business was not particularly well-suited for the pandemic.

The work-from-home reality has meant fewer colds, torpedoing demand for over-the-counter medications. At the same time, many consumers have turned to delivery giants to stock their medicine cabinets.

Last November the Sudafed hit the fan, so to speak, when Amazon launched “Amazon Pharmacy,” doubling down on its efforts in the space.

For CVS, Walgreens, and Rite Aid, playing a central role in the vaccine rollout highlights how traditional drugstores plan to compete in a landscape increasingly dominated by Walmart, Amazon, and Target.

Hot Yoga in Aisle Six

For CVS, the vaccine rollout itself will be big business – Jefferies estimates the foot traffic associated with vaccine administration will generate $1 billion in gross profit over the next month. Increasingly, CVS plans to become the “Genius Bar of healthcare.”

CVS is turning 10,000 stores into what it calls HealthHubs, miniature clinics that offer sleep apnea tests and treatment for diabetes and other chronic conditions.
They’re even throwing in yoga classes, in case you wanted to mix in a downward-facing dog with your toothpaste run.

Walgreens, which has seen shares drop 20% in the last year, is planning to take on Amazon by becoming the “fastest in retail.” While cutting costs and shifting away from foot traffic, Walgreens is doubling down on app-based ordering with curbside pickup.

Rite Aid, which was on the verge of being delisted by the NYSE in 2019, has expedited a pivot to emerging wellness and alternative medicine business lines. It’s not quite Goop, but you’ll be able to get your tea oil and see a pharmacist under the same roof.

The Takeaway

After varied stock performances in 2020, some analysts are warming to the new approaches. Rite Aid saw its stock jump 9% after it beat quarterly expectations last month, and CVS and Walgreens both have new incoming CEOs with a mandate for expediting transformation.